How to create a financial forecast for a life coach company?
Creating a financial forecast for your life coach company, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your life coach company is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a life coach company?
The financial projections for your life coach company act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your life coach company's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is needed to build a life coach company financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a life coach company, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the life coach company on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing life coach company, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your life coach company's financial forecast.
The sales forecast for a life coach company
The sales forecast, also called topline projection, is normally where you will start when building your life coach company financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing life coache companies), and consider the elements below:
- Seasonal Demand: As a life coach company, your services may be in higher demand during certain times of the year, such as the beginning of a new year when people are setting goals and resolutions. This could result in a higher average price or number of transactions during these peak periods.
- Economic Conditions: Economic factors such as unemployment rates and consumer confidence can affect the demand for life coaching services. During times of economic uncertainty, people may be less likely to invest in personal development, leading to a decrease in both average price and number of transactions.
- Competition: The presence of other life coach companies in your area or online can impact your average price and number of transactions. If there is intense competition, you may need to lower your prices or offer promotions to attract clients, leading to a decrease in average price. Additionally, if your competitors have a strong online presence, you may need to invest in marketing and advertising to stay competitive, which could affect your number of transactions.
- Client Referrals: Word-of-mouth recommendations from satisfied clients can greatly impact your business's success. If you have a high number of satisfied clients who refer others to your services, you may see an increase in both average price and number of transactions.
- Specialization: If your life coach company specializes in a specific niche, such as career coaching or relationship coaching, it can affect your average price and number of transactions. Clients seeking specialized coaching may be willing to pay a higher price, resulting in a higher average price. However, there may be a smaller pool of potential clients, leading to a lower number of transactions compared to a more general life coach company.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a life coach company
The next step is to estimate the costs you’ll have to incur to operate your life coach company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your life coach company's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and training for your team of life coaches and administrative staff.
- Accountancy fees: You may need to hire an accountant to help with bookkeeping, tax preparation, and financial planning for your life coach company.
- Insurance costs: It's important to have liability insurance to protect your business in case of any accidents or lawsuits.
- Software licences: You may need to purchase licences for software programs that help you manage client information, schedule appointments, and track your finances.
- Banking fees: This includes charges for business bank accounts, credit card processing fees, and transaction fees.
- Marketing expenses: You'll need to invest in marketing to attract clients to your life coach services. This could include advertising, website development, and social media management.
- Office rent: If you have a physical office space, you'll need to budget for rent and utilities.
- Professional development: As a life coach, it's important to continue your own personal and professional development. This may include attending conferences, workshops, or hiring a mentor.
- Travel expenses: If you offer in-person coaching sessions or attend conferences and events, you'll need to budget for travel expenses such as airfare, lodging, and transportation.
- Office supplies: This includes items like paper, printer ink, and other office supplies necessary for running your business.
- Telephone and internet: You'll need reliable phone and internet services to communicate with clients and manage your business.
- Continuing education: To stay current in your field, you may choose to invest in additional training or certifications.
- Legal fees: It's important to have a lawyer review contracts and other legal documents related to your business.
- Rent or lease of equipment: If you need specialized equipment for coaching sessions, you may choose to rent or lease it instead of purchasing it outright.
- Professional association fees: Joining a professional association for life coaches can provide networking opportunities and resources, but may also come with membership fees.
This list is not exhaustive by any means, and will need to be tailored to your life coach company's specific circumstances.
What investments are needed to start or grow a life coach company?
Creating and expanding a life coach company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a life coach company could include elements such as:
- Office Space: As a life coach, you will need a dedicated space to meet with clients and conduct sessions. This could include renting a small office or converting a room in your home into a home office.
- Equipment: In order to effectively run your life coach company, you may need to invest in equipment such as a computer, printer, phone, and office supplies.
- Furniture: Depending on the type of office space you choose, you may need to purchase furniture such as a desk, chairs, and filing cabinets. This will provide a professional and comfortable space for both you and your clients.
- Software: As a life coach, you may need to invest in software to help you manage your business, track client progress, and schedule appointments. This could include accounting software, client management software, and scheduling software.
- Website Development: In today's digital age, having a professional website is crucial for promoting your services and attracting clients. You may need to invest in website development to create an informative and visually appealing website for your life coach company.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your life coach company.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your life coach company
The next step in the creation of your financial forecast for your life coach company is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a life coach company?
Now let's have a look at the main output tables of your life coach company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your life coach company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a life coach company should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
Your life coach company's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow forecast
Your life coach company's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the life coach company:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your life coach company's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your life coach company's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your life coach company's financial forecast?
Creating your life coach company's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial forecasting software to build your life coach company's projections
The modern and easiest way is to use professional online financial forecasting software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional life coach company financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your life coach company's financial forecast?
Creating an accurate and error-free life coach company financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection software like The Business Plan Shop is built for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own life coach company, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your life coach company.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a life coach company. Don't hesitate to contact us if you have any questions!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Financial forecast example
- How to create a turnover forecast for a business?
- Sample financial forecast for business idea
Know someone who runs a life coach company? Share our business guide with them!
Founder & CEO at The Business Plan Shop Ltd
